Essential

Volume

The total number of shares, contracts, or lots traded during a given period.

Definition

Volume measures total trading activity in an instrument over a specific timeframe. It is one of the most important confirmation tools in technical analysis. High volume behind a price move suggests strong conviction and increases the likelihood that the move will continue. Low volume warns that participation is thin and the price action may reverse. In forex, tick volume (number of price changes) is used as a proxy because the market is decentralised.

How It Works

Displayed as a histogram below the price chart, each bar showing total trades per period
Rising volume in an uptrend confirms buying interest; in a downtrend confirms selling pressure
Volume spikes often occur at turning points: capitulation at bottoms, euphoria at tops
In forex, tick volume correlates well with actual volume for major pairs

Trading Tips

Never trust a breakout on low volume. Wait for volume confirmation before committing.

Watch for volume divergence. New price highs on declining volume = weakening trend.

Use volume to filter other indicator signals. An RSI divergence confirmed by a volume spike is more reliable.

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